WILLIAM DONALD SCHAEFER, Governor                            Ch. 259

Article - Commercial Law

14-12B-01.

(a) In this subtitle, the following words have the meanings indicated.

(d) "Division" means the Consumer Protection Division of the Office of the
Attorney General.

14-12B-02.

(f) (1) A buyer of health club services who suffers or sustains any loss or
damage by reason of the closing of a facility or bankruptcy by the seller of the health club
services agreement shall file a claim with the surety and, if the claim is not paid, may
bring an action based on the bond and recover against the surety. In the case of a letter
of credit or cash deposit that has been filed with the Division, the buyer may file a claim
with the Division.

(2)      Any claim under paragraph (1) of this subsection shall be filed no later
than 1 year from the date on which the facility closed or bankruptcy was filed. THE
DIVISION SHALL NOTIFY EACH KNOWN BUYER DESCRIBED IN PARAGRAPH (1) OF
THIS SUBSECTION ABOUT THE PROCEDURE FOR FILING A CLAIM, UNLESS THE
SELLER OF THE HEALTH CLUB SERVICES AGREEMENTS ESTABLISHES TO THE
SATISFACTION OF THE DIVISION THAT THE SELLER HAS PROVIDED SUFFICIENT
NOTICE TO EACH KNOWN BUYER.

(3)      The Division may file a claim with the surety on behalf of any buyer in
paragraph (1) of this subsection. The surety shall pay the amount of the claims to the
Division for distribution to claimants entitled to restitution and shall be relieved of
liability to that extent.

(4)      The liability of the surety under any bond may not exceed the aggregate
amount of the bond, regardless of the number or amount of claims filed.

(5)      If the claims filed should exceed the amount of the bond, the surety shall
pay the amount of the bond to the Division for distribution to claimants entitled to
restitution and shall be relieved of all liability under the bond.

(6)      THE DIVISION MAY OBTAIN REIMBURSEMENT FOR POSTAGE AND
OTHER REASONABLE NONSALARY EXPENSES INCURRED IN NOTIFYING BUYERS
AND DISTRIBUTING CLAIMS BY:

(I)       FILING A PRIORITY CLAIM FOR THE EXPENSES AGAINST THE
SURETY BOND POSTED BY THE SELLER; OR

(II)     APPLYING TO THE EXPENSES ON A PRIORITY BASIS THE
PROCEEDS OF THE LETTER OF CREDIT OR CASH DEPOSIT POSTED BY THE SELLER
WITH THE DIVISION.

(7)      THE PROVISIONS OF THIS SUBSECTION DO NOT APPLY WHERE THE
BUYER'S MEMBERSHIP AGREEMENT PROVIDES FOR THE TRANSFER OF
MEMBERSHIP PRIVILEGES TO A COMPARABLE NEW OR EXISTING FACILITY WITHIN
A REASONABLE DISTANCE OF THE CLOSED FACILITY.

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