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Wednesday
Jan132016

2016 Legislative Threats: Restrictions on Membership Contracts

This post is the first in a series of four case studies that demonstrate how IHRSA works to protect your health club from legislation that could harm your business. 

In 2014, a bill was brought before the Pennsylvania House of Representatives that aimed to protect consumers from unwittingly subscribing to contracts that renewed automatically in perpetuity. The bill’s proponents believed that the state’s existing law essentially forced consumers to pay for goods and services they did not use because they failed to notice a so-called “evergreen clause” in a contract’s fine print. They also believed the loophole was being exploited by unscrupulous businesses to quietly bleed funds from consumers.

However, as it was written, the bill would have not only imposed its requirements on bad actors in unregulated sectors of the state economy; the legislation would have also added to requirements of already regulated industries, including health clubs, whose governing regulations explicitly address automatic renewals.

IHRSA, coordinating with our lobbyist in Harrisburg and our members in the area, went on the offensive, educating lawmakers on the existing rules and the standard practices within the industry to ensure members are satisfied. Following these efforts, the sponsor amended the bill in order to specifically exempt health clubs. When similar legislation was taken up again this past year, only one industry remained excluded from the bill’s burdensome requirements: ours.

What occurred in Pennsylvania—a legislator seeking to regulate a contract provision like automatic renewal, without knowing how different industries utilize the tool—happens more than you might think. Often, health clubs are swept up in legislation intended for another industry (recently in Missouri, IHRSA worked to shelter health clubs from legislation aimed at providers of home alarm systems). There are also cases in which a legislator will craft a bill in knee-jerk haste after hearing from a constituent who has a dispute with their local club. 

States often seek to regulate health club membership contracts in other ways, beyond targeting automatic renewal provisions, that either pose an administrative or cost burden for health clubs, or would serve to hinder club profitability in some other way. Common examples of contract restriction legislation include: antiquated notification requirements (e.g. all renewal notifications must be sent via certified mail) and limiting health clubs’ ability to make use of cost-efficient dues collection methods, like electronic fund transfers (EFTs).

Based on recent legislative trends, conversations with state lawmakers and regulators and intelligence gathered from our lobbying teams and member clubs across the country, IHRSA predicts that we will once again face a number of bills that would restrict how a health club signs and retains its members in the upcoming sessions.

A number of indicators suggest legislators will consider the issue in multiple states in 2016, including: Connecticut, Kentucky, Maine, Massachusetts, Minnesota, New Hampshire, New Jersey, New York, Oregon, and Vermont.

IHRSA’s Public Policy team has worked to ensure that the industry is prepared to protect itself in each of these states. However, given how these bills arise (often either by accident or anecdote) there are likely to be states not on the list that consider requiring a major, costly overhaul of your membership agreements. This makes it very important to stay on top what is going on in your state, so that you can join IHRSA’s efforts to protect your business when the time inevitably comes. Be sure you are signed up to receive IHRSA’s Legislative Alerts and routinely visit IHRSA’s state pages to get the latest on issues that might impact your club.

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