STAND. COM. REP. NO. 2535

Honolulu, Hawaii

RE: S.B. No. 2770

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Ninth State Legislature

Regular Session of 2018

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection, and Health, to which was referred S.B. No. 2770 entitled:

"A BILL FOR AN ACT RELATING TO HEALTH CLUBS,"

begs leave to report as follows:

The purpose and intent of this measure is to require health clubs, beginning on January 1, 2019, to maintain a surety bond of at least $100,000 to be paid to any member who suffers loss of money paid due to the insolvency or cessation of operation of a health club.

Your Committee received testimony in support of this measure from the Department of Commerce and Consumer Affairs. Your Committee received testimony in opposition to this measure from the International Health, Racquet & Sportsclub Association.

Your Committee finds that existing law provides few protections for consumers when a health club ceases operations or becomes insolvent. Your Committee also finds that according to testimony from the Department of Commerce and Consumer Affairs, there have been several recent health club closures in Hawaii. As a result of these closures, customers who paid for services had no recourse to recover membership dues and initiation fees that were paid in advance. This measure therefore establishes surety bond requirements for health clubs, with certain exceptions for health clubs that do not collect advance payment or fees, which will help consumers recover any dues and fees that were paid in advance to a health club if that health club later becomes insolvent or goes out of business.

Your Committee has amended this measure by making technical, nonsubstantive amendments for the purposes of clarity and consistency.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection, and Health that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2770, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2770, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection, and Health,

________________________________

ROSALYN H. BAKER, Chair