Code of Virginia

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Code of Virginia
Title 59.1. Trade and Commerce
Chapter 24. Virginia Health Club Act

§ 59.1-306. Bond or letter of credit required; exception.

A. Every health club, before it enters into a health club contract and accepts any moneys in excess of the prorated monthly fee for the month when the contract is initially executed plus one month's fees or accepts any initiation fee in excess of $125, shall file and maintain with the Commissioner, in form and substance satisfactory to him, a bond with corporate surety, from a company authorized to transact business in the Commonwealth or a letter of credit from a bank insured by the Federal Deposit Insurance Corporation in the amounts indicated below:

aNumber of Amount of bond
bapplicable contractsor letter of credit
c0 to 250$10,000
d251 to 500$20,000
e501 to 750$30,000
f751 to 1000$40,000
g1001 to 1250$50,000
h1251 to 1500$60,000
i1501 to 1750$70,000
j1751 to 2000$80,000
k2001 or more$100,000

For purposes of calculating the number of applicable unexpired health club contracts when determining the required amount of bond or letter of credit, health club contracts entered into on or after January 1, 2005, with a term that exceeds 13 months shall be counted as multiple health club contracts, such that the number of applicable contracts counted with respect thereto shall equal the total of the number of full years and any partial year in its term. However, this paragraph shall not apply (i) to health club contracts that are payable only on a monthly basis and for which the initiation fee is no more than $250 or (ii) if the number of the health club's contracts in effect with a term that exceeds 13 months is less than 10 percent of the total of its health club contracts.

The number of applicable unexpired contracts shall be separately calculated for each facility.

A health club shall file a separate bond or letter of credit with respect to each separate facility, even though the separate facilities are owned or operated by the same health club.

However, no health club shall be required to file with the Commissioner bonds or letters of credit in excess of $300,000. If the $300,000 limit is applicable, then the bonds or letters of credit filed by the health club shall apply to all facilities owned or operated by the same health club.

B. A health club may sell health club contracts of up to 36 months' duration for a facility for which a health club has not filed a bond or letter of credit so long as the amount of payment actually charged, due or received under the health club contracts each month by the health club or any holder thereunder does not exceed the monthly fee calculated pursuant to the definition thereof in § 59.1-296, with the exception that the payment actually charged may include a maximum initiation fee of $125 for health club contracts of 13 months or more in duration.

1984, c. 738; 1985, c. 585; 1990, cc. 392, 433; 1992, c. 117; 2004, c. 988; 2010, c. 439; 2014, c. 459.

The chapters of the acts of assembly referenced in the historical citation at the end of this section may not constitute a comprehensive list of such chapters and may exclude chapters whose provisions have expired.