KRS 367.906: Form and amount of surety bonds -- Exemptions from bonding

requirement -- Effect of change in membership, ownership.

(1) The surety bond required by KRS 367.905(1)(b) shall be in favor of the Attorney

General's Office of Consumer Protection and s hall be held for compensation to any

member who suffers loss of money paid due to the insolvency of the health spa,

cessation of operation of the health spa, or failure of the health spa to open for

business within ninety (90) days from the sale of the first contract.

(2) The bond shall be in a form prescribed by the Attorney General's Office of

Consumer Protection and shall be issued by a company authorized to transact

business in the Commonwealth of Kentucky.

(3) The amount of the bond shall be computed as follows:

Number of

unexpired contracts Amount of bond

150 or fewer $10,000

151 to 300 $25,000

301 or more $50,000

(4) The Attorney General's Office of Consumer Protection shall exempt a spa from the

bonding requirement if all of its unexpired contracts and present membership plans

meet the following criteria:

(a) No initiation fee, or similar nonrecurring fee, is charged at or near the

beginning of the contract term or renewal period, and

(b) At no time is any member charged for use of facilities or services more than

thirty-one (31) days in advance.

(5) If, because of an increase in membership or change in membership plans, a spa is

required to file a bond or increase the amount of its bond, i t shall notify the

Attorney General's Office of Consumer Protection in writing at least thirty (30)

days prior to the expected change. No contract in excess of the limits stated in

subsection (3) of this section or not in compliance with subsection (4) of this

section shall be sold until a new bond in the required amount has been provided.

(6) A change in ownership shall not release, cancel or terminate liability under any

bond previously filed unless the Attorney General's Office of Consumer Protection

agrees in writing to the release, cancellation or termination because the new owner

has filed a new bond for the benefit of the previous owner's members, or because

the former owner has paid the required refunds to its members.