SECTION 102.35. Adjudication of Claims and Posting of Notice of Closure

(a) Within 10 days of receiving notice that a health spa which has posted a security with the secretary has ceased operations, the secretary shall notify the surety or obligor that:

(1) the health spa has ceased operations;

(2) the members of the health spa may have suffered financial losses within the meaning of the Health Spa Act (Act) and these rules;

(3) the secretary may make a claim on the bond or other security or require that the surety or obligor holding funds compensate the members for any losses; and

(4) the secretary intends to inform the registrant that the registrant must post a notice at the health spa location notifying the public of the fact that the health spa is closed and the procedures for and the timeframe in which documents must be submitted to the secretary to perfect a claim under the security posted.

(b) The notice must be:

(1) at least 8 1/2 by 11 inches in size;

(2) posted inside and outside each entrance to the health spa; and

(3) posted continuously for at least 30 days and include the following information:

(A) the date the health spa is scheduled to close or relocate;

(B) that a member of the health spa may file a claim with the secretary to recover actual financial loss within the time prescribed by the Act; and

(C) the procedures for perfecting a security claim.

(c) If, no later than 10 days from the date the secretary discovers a health spa is closed, the secretary determines that the registrant has not posted the required notice, the secretary will take action to post the notice. In all cases, the secretary of state will post a notice of closure on the secretary of state's web site at: http://www.sos.state.tx.us/statdoc/healthspas/index.shtml.

(d) All claims received by the secretary after 90 days following the date the notice is first posted are barred and may not be considered by the secretary. The secretary has no discretion to waive the statutory time period for filing claims.

(e) In order to perfect a claim, a claimant must submit a copy of the contract that forms a basis of the claim together with documentation or a sworn affidavit indicating the total of payments made pursuant to the contract. In the event the claimant does not submit adequate documentation, the secretary shall promptly inform the claimant of this fact together with notice that adequate documentation must be received within 30 days in order for the claim to be considered.

(f) If the total of claims evidencing actual financial loss exceeds the amount of the security, the secretary shall adjudicate the claims on a pro rata basis by dividing the amount of the security by the total amount of the claims in order to ascertain a percentage to be applied to each claim.

(g) After the time for filing claims has lapsed, the secretary shall timely present claims to the surety or obligor for payment together with an administrative order signed by the secretary or deputy secretary pursuant to §702.157 of the Act.

(h) Actual financial loss shall mean and be limited to those sums which have been paid under a health spa contract to a registrant or a registrant's assignee and, which at the time the health spa is closed, are unearned. Actual financial losses shall be computed in accordance with §702.252 of the Act by multiplying the gross monthly payment by the total of months or partial months remaining on a contract at the time of closing minus any payments not made. For the purposes of this section the following terms shall have the following meanings.

(1) Gross monthly payment--The gross monthly payment shall be calculated by determining the total of payments, including down payments and initiation fees required by the contract, divided by the total number of months in the term of the contract.

(2) Calculation of dates--The date of closing and the date of the contract expiration shall be rounded to the nearest full month. The total months remaining on the contract shall be calculated by subtracting the date of closing from the expiration date of the contract. The result will be expressed in whole months.

(i) The surety or obligor shall provide the secretary proof of payment of the members' claims.

Source Note: The provisions of this §102.35 adopted to be effective January 18, 1993, 18 TexReg 61; amended to be effective October 22, 2001, 26 TexReg 8340; amended to be effective April 20, 2009, 34 TexReg 2375