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Rule Proposal
Volume 40, Issue 19
Issue Date: October 6, 2008
Law and Public Safety
DIVISION OF CONSUMER AFFAIRS

Proposed New Rule: N.J.A.C. 13:45A-25.6

Health Club Contracts

Authorized By: New Jersey Division of Consumer Affairs, David M. Szuchman, Director.
Authority: N.J.S.A. 56:8-48.
Calendar Reference: See Summary below for explanation of exemption to calendar requirement.

Proposal Number: PRN 2008-336.
Submit written comments by December 5, 2008 to:

Burt Liebman
Director of Legislative and Regulatory Affairs
New Jersey Division of Consumer Affairs
124 Halsey Street
P.O. Box 45027
Newark, NJ 07101

The agency proposal follows:

Summary

N.J.S.A. 56:8-42g requires that health club services contracts afford a health club member the right to cancel the contract and receive a refund of the contract price for the unused portion of the contract if the member relocates to a location more than 25 miles from the health club or any affiliated health club offering the same or similar services and facilities. If the member's new residence is within 25 miles of an affiliated health club offering the same or similar services and facilities without additional expense, the original health club may refuse to cancel the contract.

Under N.J.S.A. 56:8-41, health clubs selling services to be provided over a period of more than three months are required to post a bond or other security for the benefit of members in the event of the health club's breach of contract or bankruptcy. The Division is proposing a new rule to clarify that the bond remains available to a relocating member, whose contract remains in effect because of the availability of the services and facilities of an affiliated health club, should the affiliated health club close, withdraw the member's access to its services and facilities, or charge the member for the services and facilities. The Division is proposing to recodify N.J.A.C. 13:45A-25.6 as 25.7 and a new rule N.J.A.C. 13:45A-25.6. The proposed new rule requires the health club to affirm the contract and identify the affiliated health club or clubs on which it relies. It includes definitions and also clarifies that the address of the health club to which notice of cancellation is to be sent is the address of the health club facility where the member joined.

The Division has determined that the comment period for this proposal shall be 60 days. Therefore, pursuant to N.J.A.C. 1:30 -3.3(a) 5, this proposal is excepted from the rulemaking calendar requirement.

Social Impact

The proposed new rule primarily benefits health club members who relocate, although health clubs may benefit from the clarification of certain provisions of N.J.S.A. 56:8-42g. The proposed new rule makes clear to both the health club and the member, the address to which notice of cancellation is to be sent. It also makes it clear that if the contract is not cancellable because of the availability of an affiliated health club offering the same or similar services within 25 miles of the relocated health club member, the security for the performance of the obligations of the original health club to the relocated member under the contract, including the obligation to give the refund, remain secured by the bond posted with the Division.

The Division is not aware of the number of relocating health club members and health clubs that would be affected by the proposed new rule.

Economic Impact

The proposed new rule clarifies that the bond posted in connection with the original health club contract secures the payment of any refund payable to the member. It may afford an economic benefit to a relocated health club member if the affiliated health club that prevented the cancellation of the original health club contract were to close or its services and facilities were otherwise not available to the relocated member and the original health club refuses or is unable to pay the refund.

Federal Standards Statement

A Federal standards analysis is not required because the proposed new rule is not subject to any Federal standards or requirements.

Jobs Impact

The Attorney General does not anticipate that the proposed new rule will increase or decrease jobs in the State.

Agriculture Industry Impact

The proposed new rule will have no impact on the agriculture industry in the State.

Regulatory Flexibility Analysis

There are 679 health clubs registered with the Division. Some health clubs may be small businesses. The proposed new rule applies to small businesses, as defined in the Regulatory Flexibility Act, N.J.S.A. 52:14B-16 et seq., as well as large businesses. The proposed new rule clarifies certain provisions of N.J.S.A. 56:8-42g that might be considered ambiguous. It imposes no reporting or recordkeeping requirements, but does contain compliance requirements, which are discussed in the Summary above. The interests of consumers sought to be protected by the proposed new rule are the same regardless of the size of the business and, therefore, affected businesses of all sizes are subject to the same requirements. The economic impact of the compliance requirements are discussed in the Economic Impact above. Professional services are not required for compliance.

Smart Growth Impact

The Division does not believe that the proposed new rule will have any impact upon the achievement of smart growth or upon the implementation of the State Development and Redevelopment Plan.

Housing Affordability Impact Statement

The proposed new rule will have an insignificant impact on affordable housing in New Jersey and there is an extreme unlikelihood that the rule would evoke a change in the average costs associated with housing because the proposed rule concerns health club contracts.

Smart Growth Development Impact Statement

The proposed new rule will have an insignificant impact on smart growth development and there is an extreme unlikelihood that the rule would evoke a change in housing production in Planning Areas 1 or 2 or within designated centers under the State Development and Redevelopment Plan in New Jersey because the proposed rule concerns health club contracts.

Full text of the proposal follows (additions indicated in boldface thus):

13:45A-25.6 Health club contracts

(a) For the purpose of this section, the following words and terms shall have the following meanings, unless the context clearly indicates otherwise:

"Affiliated health club" means a health club located within 25 miles of a member's new permanent residence that will provide the same or similar services and facilities to the member as the originating health club.

"Member" means a buyer of a health club services contract from the originating health club.

"Originating health club" means the health club that is party to a contract sought to be cancelled.

"Originating health club's facility" means the facility identified in the contract between a member and the originating health club by name and street address as the health club that the member joined.

(b) A health club services contract subject to cancellation pursuant to N.J.S.A. 56:8-42g shall not be cancelled if, after receipt of a notice of cancellation from a member, which notice shall be sent or delivered to the originating health club's facility, the originating health club reaffirms the contract in writing to the member guarantying that there is an affiliated health club or clubs that will provide to that member the use of the same or similar services and facilities as the originating health club at no additional expense for the remaining term of the contract, giving the name and address of the affiliated club or clubs.

(c) If, during the remaining term of a health club services contract that is subject to cancellation but for (b) above, the services and facilities contracted for become unavailable from the affiliated health club without additional expense and the originating health club receives notice from the member to that effect, the originating health club shall refund to the member, within 20 days of receipt of notice, the pro rata portion of the contract price paid to the originating health club that relates to the portion of the contract term for which the services and facilities are unavailable and the member shall have no further obligation under the contract.

(d) The obligation to make the refund provided for in (c) above, is an obligation of the originating health club under the health club services contract secured by any bond or other security it maintains under N.J.S.A. 56:8-41.

Recodify existing N.J.A.C. 13:45A-25.6 as 25.7 (No change in text.)

   
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