N.Y. GBS Law § 622-A — New York Code / Act GBS / Article 30 / Section 622-A
Bond, letter of credit or certificate of deposit required
Status: in_force

§ 622-a. Bond, letter of credit or certificate of deposit required. 1.\nEvery health club, except as provided in subdivision ten of this\nsection, before it enters into any contract for services for use by a\nbuyer of a health club, shall file and at all times maintain with the\nsecretary, in form, amount as prescribed herein and substance\nsatisfactory to him:\n  (a) A bond with a corporate surety, from a company authorized to do\nbusiness in this state; or\n  (b) An irrevocable letter of credit or a certificate of deposit from a\nNew York state or federally chartered bank, trust company, savings bank\nor savings and loan association qualified to do business in New York\nstate and insured by the federal deposit insurance corporation.\n  2. The principal sum of the bond, letter of credit, or certificate of\ndeposit shall be;\n  (a) Fifty thousand dollars if the health club sells contracts for\nservices for a term not greater than twelve months; or\n  (b) Seventy-five thousand dollars if the health club sells contracts\nfor services for a term more than twelve months and up to twenty-four\nmonths; or\n  (c) One hundred fifty thousand dollars if the health club sells\ncontracts for services for a term more than twenty-four months and up to\nthirty-six months.\n  3. For health clubs with three or more locations, or for multiple\nfranchises of a common franchisor, the following amounts shall be added\nto the sum required in subdivision two of this section for the bond,\nletter of credit, or certificate of deposit:\n  (a) For three to four locations an additional fifty thousand dollars,\n  (b) For five to six locations an additional one hundred thousand\ndollars,\n  (c) For seven to nine locations an additional one hundred fifty\nthousand dollars,\n  (d) For ten or more locations an additional two hundred thousand\ndollars.\n  4. The bond, letter of credit or certificate of deposit shall be\npayable in favor of the people of the state of New York for the benefit\nof any buyer injured in the event that the seller goes out of business\nprior to the expiration of the buyer's contract for services, or\notherwise fails to provide a refund to the buyer after cancellation of\nthe buyer's contract for services as provided for in section six hundred\ntwenty-four of this article.\n  5. The aggregate liability of the surety upon the bond or the banking\norganization upon the letter of credit or certificate of deposit to all\npersons for all breaches of the conditions of the bond shall in no event\nexceed the amount of the bond, letter of credit or certificate of\ndeposit.\n  6. The bond, letter of credit or certificate of deposit filed and\nmaintained pursuant to this section shall not be cancelled, revoked, or\nterminated except after notice to, and with the consent of, the\nsecretary at least forty-five days in advance of such cancellation,\nrevocation, or termination.\n  7. Any person claiming against the bond, letter of credit or\ncertificate of deposit may bring and maintain an action against the\nseller and the surety or bank, trust company, savings bank or savings\nand loan association.\n  8. For the purposes of this section, a health club shall be considered\nto be a new health club subject to the requirements of a bond, letter of\ncredit or certificate of deposit as provided herein, at the time the\nhealth club changes ownership, or, in the case of corporate ownership,\nat the time thirty percent or more of the stock changes or has changed\nownership. A change in ownership of a health club shall not release,\ncancel or terminate liability under this section under any bond, letter\nof credit or certificate of deposit filed for a health club as to any\nbuyer who purchases a health club contract while such bond, letter of\ncredit or certificate of deposit is in effect unless the transferee,\npurchaser, successor, or assignee of such health club obtains a bond,\nletter of credit or certificate of deposit under this section for the\nbenefit of such buyer.\n  9. No contract for services shall be enforceable against the buyer if\nthe seller has failed to comply with any requirements of this section.\n  10. Health clubs shall be excluded from the requirement to file a\nbond, letter of credit, or certificate of deposit if all payments for\nwhich the buyer is obligated including, but not limited to down\npayments, initiation fees, enrollment fees, membership fees or any other\ndirect payments to the health club do not exceed one hundred fifty\ndollars. A health club shall also be excluded from the requirement to\nfile a bond, letter of credit or certificate of deposit, if it offers\nits buyers a monthly dues payment option for each dues payment plan it\noffers to customers, provided that: (a) both the annual and the monthly\nmembership options are disclosed to customers prior to entering into any\nmembership contract; (b) that the monthly dues, including any initiation\nfee or other charge, do not exceed one hundred fifty dollars; (c) that\nthe paid in full fee is not discounted by more than ten percent of the\nsum of the initiation fee and the monthly dues payments; and (d) that\nthe term of either option be no more than twelve months and that the\nmembership contract not contain an automatic renewal provision.\nAdditionally, any health club which owns five or more acres of real\nproperty which is used directly for the purpose for which the club is\nformed, and any health club the use of which is exclusively restricted\nto residents of a homeowners' association, cooperative or condominium\nand which is owned by and operated on the premises of such homeowners'\nassociation, cooperative or condominium, shall be excluded from the\nrequirement to file a bond, letter of credit or certificate of deposit.\n  11. (a) Every health club shall post, in at least two conspicuous\nareas within the club, including, if applicable, an entrance area where\nbuyers are required to register, a sign no smaller than nine inches by\nfourteen inches that sets forth the following notice clearly and\nconspicuously:\n                IMPORTANT NOTICE FOR HEALTH CLUB MEMBERS\n  New York State law requires certain health clubs to have a bond or\nother form of financial security to protect members in the event the\nclub closes.\nThis club (insert whichever term is applicable)\n      has posted the financial security required by law.\n                                   or\n      is exempt from this requirement.\nYOU MAY ASK A REPRESENTATIVE OF THE CLUB FOR PROOF OF THE CLUB's\nCOMPLIANCE WITH THIS LAW. YOU MAY ALSO OBTAIN THIS INFORMATION FROM THE\nNEW YORK STATE DEPARTMENT OF STATE, DIVISION OF LICENSING SERVICES, 162\nWASHINGTON AVENUE, ALBANY, N.Y. 12231.\n  (b) Health clubs that operate at two or more locations shall post\nnotices in compliance with paragraph (a) of this subdivision at each\nsuch location.\n  12. The notice required by subdivision eleven of this section shall be\nincorporated into any contract for services executed by a health club in\nat least ten point bold type.\n  13. Every contract for services which offers the consumer the option\nto pay in installments shall contain the following notice, written in at\nleast ten point bold type and placed directly above the space reserved\nfor the signature of the buyer:\n  THIS NOTICE PROVIDES IMPORTANT INFORMATION ABOUT YOUR PAYMENT OPTIONS\n  You may make payments on an installment basis or in a single payment.\nPaying the full amount may be less expensive, but may involve financial\nrisks to you. Read this notice carefully before making a decision.\n  New York State law requires certain health clubs to post a bond or\nother financial security to protect members in the event the club\ncloses. This club is exempt from this requirement since it gives members\nthe option of paying on an installment basis, therefore it need not post\na bond or other form of financial security.\n  In deciding whether to make your payments on an installment basis, you\nshould be aware that if the club closes, although the club will remain\nlegally liable for a refund, you may risk losing your money if the club\nis unable to meet its financial obligations to members.\n