1. (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. (1) the health spa has ceased operations;
   2. (2) members of the health spa may have suffered financial losses within the meaning of the Act and these rules; and
   3. (3) 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 that a health spa member has 90 days from the date the notice is first posted to perfect a claim under the security posted.

2. (b) The notice must be:

   1. (1) at least 8 1/2 by 11 inches in size;
   2. (2) posted in a place that is readily accessible to the general public during the former operating hours of the health spa; and
   3. (3) posted continuously for at least 14 days.
3. (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.
4. (d) Regardless of the method utilized for notice to the members, all claims received by the secretary after 90 days following the date of the first notice are barred and shall not be considered by the secretary. If the total of claims evidencing actual financial loss exceed 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.
5. (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 by the bar date in order for the claim to be considered.
6. (f) The secretary shall timely present claims together with an administrative order for payment by the surety or obligor.

7. (g) 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 calculated 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. (1) Closed--The condition wherein the facilities of a health spa are no longer available to its members and equivalent facilities within 10 miles of the closed facility have not been made available to the members of the closed facilities; or where a registrant has sold a registered location and the security required in section of the Act has not been transferred to the new owner or the new owner has neither adopted nor honored the contracts of existing members.
   2. (2) 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.
   3. (3) 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.
8. (h) If the members' claims do not exceed the amount of the security, the registrant shall arrange for the direct payment of the claims to the members.
9. (i) The surety or obligor shall provide the secretary proof of payment of the members' claims.
10. (j) In the event the total of claims exceed the amount of the security, the claims shall be paid on a pro rata basis by dividing the amount of the security by the total amount of the claims. This percentage shall be applied to each claim.

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.