Health Club Bonds

Under Colorado law (§ 6-1-704) any health club that sells any membership contract, the actual or financial duration of which, including any option to renew, is longer than twenty-four months, but which is not longer than thirty-six months, does not commit a deceptive trade practice if

  1. The health club has been in operation in this state more than two years; and
  2. The health club maintains a bond with a corporate surety from a company authorized to do business in this state or other security acceptable to and approved by the attorney general; and
  3. The aggregate amount of the bond is one hundred thousand dollars for each club location; and
  4. The bond is payable to the state for the benefit of any buyer injured in the event the health club goes out of business prior to the expiration of the buyer's membership contract; and
  5. The bond is maintained for so long as the health club has any membership contracts in place and outstanding, the specified term for which exceeds twenty-four months; and
  6. The bond is not cancelled, revoked, or terminated except after notice to, and with the written consent of, the attorney general at least forty-five days in advance of such cancellation, revocation, or termination; and
  7. The annual renewal option for continued membership contained in the membership contract is not automatic but requires that the buyer affirmatively accept the renewal option by notice in writing to the person selling the membership contract for reasonable consideration on or before the expiration of each contract term, but not more than six months prior to the expiration of any contract term; and
  8. In the event that the health club elects to cancel, revoke, or terminate the bond, it posts a notice of such action, in twenty-four-point bold-faced type, to its customers, on the front door of such health club


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