S.B. 245

1

CONSUMER PROTECTION AMENDMENTS
2 2001 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: Mike Dmitrich
5 This act modifies the Commerce and Trade Code. The act amends the definition of a
6 deceptive act or practice by a supplier. The act amends the definition of an assisted
7 marketing plan. The act adjusts the bonding requirements for credit services organizations
8 and health spa facilities.
9 This act affects sections of Utah Code Annotated 1953 as follows:
10 AMENDS:
11 13-11-4, as last amended by Chapter 21, Laws of Utah 1999
12 13-15-2, as last amended by Chapter 85, Laws of Utah 1995
13 13-21-3, as last amended by Chapter 124, Laws of Utah 1999
14 13-23-5, as last amended by Chapter 89, Laws of Utah 1995
15 Be it enacted by the Legislature of the state of Utah:
16 Section 1. Section 13-11-4 is amended to read:
17 13-11-4. Deceptive act or practice by supplier.
18 (1) A deceptive act or practice by a supplier in connection with a consumer transaction
19 violates this chapter whether it occurs before, during, or after the transaction.
20 (2) Without limiting the scope of Subsection (1), a supplier commits a deceptive act or
21 practice if the supplier knowingly or intentionally:
22 (a) indicates that the subject of a consumer transaction has sponsorship, approval,
23 performance characteristics, accessories, uses, or benefits, if it has not;
24 (b) indicates that the subject of a consumer transaction is of a particular standard, quality,
25 grade, style, or model, if it is not;
26 (c) indicates that the subject of a consumer transaction is new, or unused, if it is not, or has
27 been used to an extent that is materially different from the fact;

28 (d) indicates that the subject of a consumer transaction is available to the consumer for a
29 reason that does not exist;
30 (e) indicates that the subject of a consumer transaction has been supplied in accordance
31 with a previous representation, if it has not;
32 (f) indicates that the subject of a consumer transaction will be supplied in greater quantity
33 than the supplier intends;
34 (g) indicates that replacement or repair is needed, if it is not;
35 (h) indicates that a specific price advantage exists, if it does not;
36 (i) indicates that the supplier has a sponsorship, approval, or affiliation the supplier does
37 not have;
38 (j) indicates that a consumer transaction involves or does not involve a warranty, a
39 disclaimer of warranties, particular warranty terms, or other rights, remedies, or obligations, if the
40 representation is false;
41 (k) indicates that the consumer will receive a rebate, discount, or other benefit as an
42 inducement for entering into a consumer transaction in return for giving the supplier the names of
43 prospective consumers or otherwise helping the supplier to enter into other consumer transactions,
44 if receipt of the benefit is contingent on an event occurring after the consumer enters into the
45 transaction;
46 (l) after receipt of payment for goods or services, fails to ship the goods or furnish the
47 services within the time advertised or otherwise represented or, if no specific time is advertised
48 or represented, fails to ship the goods or furnish the services within 30 days, unless within the
49 applicable time period the supplier provides the buyer with the option to either cancel the sales
50 agreement and receive a refund of all previous payments to the supplier or to extend the shipping
51 date to a specific date proposed by the supplier, but any refund shall be mailed or delivered to the
52 buyer within ten business days after the seller receives written notification from the buyer of the
53 buyer's right to cancel the sales agreement and receive the refund;
54 (m) fails to furnish a notice of the purchaser's right to cancel a direct solicitation sale
55 within three business days of the time of purchase if the sale is made other than at the supplier's
56 established place of business pursuant to the supplier's personal contact, whether through mail,
57 electronic mail, facsimile transmission, telephone, or [personal contact] any other form of direct
58 solicitation and if the sale price exceeds $25, unless the supplier's cancellation policy is

59 communicated to the buyer and the policy offers greater rights to the buyer than this Subsection
60 (2)(m), which notice shall be a conspicuous statement written in dark bold at least 12 point type,
61 on the first page of the purchase documentation, and shall read as follows: "YOU, THE BUYER,
62 MAY CANCEL THIS CONTRACT AT ANY TIME PRIOR TO MIDNIGHT OF THE THIRD
63 BUSINESS DAY (or time period reflecting the supplier's cancellation policy but not less than
64 three business days) AFTER THE DATE OF THE TRANSACTION OR RECEIPT OF THE
65 PRODUCT, WHICHEVER IS LATER.";
66 (n) promotes, offers, or grants participation in a pyramid scheme as defined under Title
67 76, Chapter 6a, Pyramid Scheme Act;
68 (o) represents that the funds or property conveyed in response to a charitable solicitation
69 will be donated or used for a particular purpose or will be donated to or used by a particular
70 organization, if the representation is false; [or]
71 (p) if a consumer indicates his intention of making a claim for a motor vehicle repair
72 against his motor vehicle insurance policy:
73 (i) commences the repair without first giving the consumer oral and written notice of:
74 (A) the total estimated cost of the repair; and
75 (B) the total dollar amount the consumer is responsible to pay for the repair, which dollar
76 amount may not exceed the applicable deductible or other copay arrangement in the consumer's
77 insurance policy; or
78 (ii) requests or collects from a consumer an amount that exceeds the dollar amount a
79 consumer was initially told he was responsible to pay as an insurance deductible or other copay
80 arrangement for a motor vehicle repair under Subsection (2)(p)(i), even if that amount is less than
81 the full amount the motor vehicle insurance policy requires the insured to pay as a deductible or
82 other copay arrangement, unless:
83 (A) the consumer's insurance company denies that coverage exists for the repair, in which
84 case, the full amount of the repair may be charged and collected from the consumer; or
85 (B) the consumer misstates, before the repair is commenced, the amount of money the
86 insurance policy requires the consumer to pay as a deductible or other copay arrangement, in which
87 case, the supplier may charge and collect from the consumer an amount that does not exceed the
88 amount the insurance policy requires the consumer to pay as a deductible or other copay
89 arrangement[.];

90 (q) includes in any contract, receipt, or other written documentation of a consumer
91 transaction, or any addendum to any contract, receipt, or other written documentation of a
92 consumer transaction, any confession of judgment or any waiver of any of the rights to which a
93 consumer is entitled under this chapter; or
94 (r) charges a consumer for a consumer transaction that has not previously been agreed to
95 by the consumer.
96 Section 2. Section 13-15-2 is amended to read:
97 13-15-2. Definitions.
98 As used in this chapter:
99 (1) (a) "Assisted marketing plan" means the sale or lease of any products, equipment,
100 supplies, or services that are sold to the purchaser upon payment of an initial required
101 consideration of $300 or more for the purpose of enabling the purchaser to start a business, and
102 in which the seller represents:
103 (i) that the seller will provide locations or assist the purchaser in finding locations for the
104 use or operation of vending machines, racks, display cases, or other similar devices, or currency
105 operated amusement machines or devices, on premises neither owned nor leased by the purchaser
106 or seller;
107 (ii) that the seller will purchase any or all products made, produced, fabricated, grown, or
108 modified by the purchaser, using in whole or in part the supplies, services, or chattels sold to the
109 purchaser;
110 (iii) that the seller will provide the purchaser with a guarantee that the purchaser will
111 receive income from the assisted marketing plan that exceeds the price paid for the assisted
112 marketing plan, or repurchase any of the products, equipment, supplies, or chattels supplied by the
113 seller if the purchaser is dissatisfied with the assisted marketing plan; or
114 (iv) that upon payment by the purchaser of a fee or sum of money, which exceeds $300
115 to the seller, the seller will provide a sales program or marketing program that will enable the
116 purchaser to derive income from the assisted marketing plan that exceeds the price paid for the
117 marketing plan[, but Subsection (1)(a)(iv) does not apply to the sale of a sales program or
118 marketing program made in conjunction with the licensing of a registered trademark or service
119 mark].
120 (b) "Assisted marketing plan" does not include:

121 (i) the sale of an ongoing business when the owner of that business sells and intends to sell
122 only that one assisted marketing plan;
123 (ii) not-for-profit sale of sales demonstration equipment, materials, or samples for a total
124 price of $300 or less; or
125 (iii) the sale of a package franchise or a product franchise defined by and in compliance
126 with Federal Trade Commission rules governing franchise and business opportunity ventures[, if
127 the seller does not make any representation defined in Subsections (1)(a)(i), (ii), (iii), or (iv)].
128 (c) As used in Subsection (1)(a)(iii) "guarantee" means a written agreement, signed by the
129 purchaser and seller, disclosing the complete details and any limitations or exceptions of the
130 agreement.
131 (2) "Business opportunity" means an assisted marketing plan subject to this chapter.
132 (3) "Division" means the Division of Consumer Protection of the Department of
133 Commerce.
134 (4) (a) "Initial required consideration" means the total amount a purchaser is obligated to
135 pay under the terms of the assisted marketing plan, either prior to or at the time of delivery of the
136 products, equipment, supplies, or services, or within six months of the commencement of
137 operation of the assisted marketing plan by the purchaser. If payment is over a period of time,
138 "initial required consideration" means the sum of the down payment and the total monthly
139 payments.
140 (b) "Initial required consideration" does not mean the not-for-profit sale of sales
141 demonstration equipment, materials, or supplies for a total price of less than $300.
142 (5) "Person" means any natural person, corporation, partnership, organization, association,
143 trust, or any other legal entity.
144 (6) "Purchaser" means a person who becomes obligated to pay for an assisted marketing
145 plan.
146 (7) "Registered trademark" or "service mark" means a trademark, trade name, or service
147 mark registered with the United States Patent and Trademark Office, or Utah, or the state of
148 incorporation if a corporation.
149 (8) "Seller" means a person who sells or offers to sell an assisted marketing plan.
150 Section 3. Section 13-21-3 is amended to read:
151 13-21-3. Credit services organizations -- Prohibitions.

152 (1) A credit services organization, its salespersons, agents, and representatives, and
153 independent contractors who sell or attempt to sell the services of a credit services organization
154 may not do any of the following:
155 (a) conduct any business regulated by this chapter without first:
156 (i) securing a certificate of registration from the division; and
157 (ii) unless exempted under Section 13-21-4 , posting a bond, letter of credit, or certificate
158 of deposit with the division in the amount of S [ [ ] $100,000 [ ] ] [ $75,000 ] s ;
159 (b) make a false statement, or fail to state a material fact, in connection with an application
160 for registration with the division;
161 (c) charge or receive any money or other valuable consideration prior to full and complete
162 performance of the services the credit services organization has agreed to perform for the buyer
163 [unless the credit services organization meets the requirements of Subsection (1)(a)(ii)];
164 (d) dispute or challenge, or assist a person in disputing or challenging an entry in a credit
165 report prepared by a consumer reporting agency without a factual basis for believing and obtaining
166 a written statement for each entry from the person stating that that person believes that the entry
167 contains a material error or omission, outdated information, inaccurate information, or unverifiable
168 information;
169 (e) charge or receive any money or other valuable consideration solely for referral of the
170 buyer to a retail seller who will or may extend credit to the buyer, if the credit that is or will be
171 extended to the buyer is upon substantially the same terms as those available to the general public;
172 (f) make, or counsel or advise any buyer to make, any statement that is untrue or
173 misleading and that is known, or that by the exercise of reasonable care should be known, to be
174 untrue or misleading, to a credit reporting agency or to any person who has extended credit to a
175 buyer or to whom a buyer is applying for an extension of credit, with respect to a buyer's
176 creditworthiness, credit standing, or credit capacity;
177 (g) make or use any untrue or misleading representations in the offer or sale of the services
178 of a credit services organization or engage, directly or indirectly, in any act, practice, or course of
179 business that operates or would operate as fraud or deception upon any person in connection with
180 the offer or sale of the services of a credit services organization; and
181 (h) transact any business as a credit services organization, as defined in Section 13-21-2 ,
182 without first having registered with the division by paying an annual fee set pursuant to Section

183 63-38-3.2 and filing proof that it has obtained a bond or letter of credit as required by Subsection
184 (1).
185 (2) (a) A bond, letter of credit from a Utah depository, or certificate of deposit posted with
186 the division shall be used to cover the losses of any person arising from a violation of this chapter
187 by the posting credit services organization. A bond, letter of credit, or certificate of deposit may
188 also be used to satisfy administrative fines and civil damages arising from any enforcement action
189 against the posting credit service organization.
190 (b) A bond, letter of credit, or certificate of deposit shall remain in force:
191 (i) until replaced by a bond, letter of credit, or certificate of deposit of identical or superior
192 coverage; or
193 (ii) for one year after the credit servicing organization notifies the division in writing that
194 it has ceased all activities regulated by this chapter.
195 Section 4. Section 13-23-5 is amended to read:
196 13-23-5. Registration -- Bond, letter of credit, or certificate of deposit required --
197 Penalties.
198 (1) (a) (i) It is unlawful for any health spa facility to operate in this state unless the facility
199 is registered with the division.
200 (ii) Registration is effective for one year. If the health spa facility renews its registration,
201 the registration shall be renewed at least 30 days prior to its expiration.
202 (iii) The division shall provide by rule for the form, content, application process, and
203 renewal process of the registration.
204 (b) Each health spa registering in this state shall designate a registered agent for receiving
205 service of process. The registered agent shall be reasonably available from 8 a.m. until 5 p.m.
206 during normal working days.
207 (c) The division shall charge and collect a fee for registration under guidelines provided
208 in Section 63-38-3.2 .
209 (2) (a) Each health spa shall obtain and maintain:
210 (i) a performance bond issued by a surety authorized to transact surety business in this
211 state;
212 (ii) an irrevocable letter of credit issued by a financial institution authorized to do business
213 in this state; or

214 (iii) a certificate of deposit.
215 (b) The bond, letter of credit, or certificate of deposit shall be payable to the division for
216 the benefit of any consumer who incurs damages as the result of:
217 (i) the health spa's violation of this chapter; or
218 (ii) as the result of the health spa's going out of business or relocating and failing to offer
219 an alternate location within ten miles.
220 (c) The division may recover from the bond, letter of credit, or certificate of deposit the
221 costs of collecting and distributing funds under this section, up to 10% of the face value of the
222 bond, letter of credit, or certificate of deposit but only if the consumers have fully recovered their
223 damages first. The total liability of the issuer of the bond, letter of credit, or certificate of deposit
224 may not exceed the amount of the bond, letter of credit, or certificate of deposit. The health spa
225 shall maintain a bond, letter of credit, or certificate of deposit in force for one year after it notifies
226 the division in writing that it has ceased all activities regulated by this chapter.
227 (d) A health spa providing services at more than one location shall comply with the
228 requirements of Subsection (2)(a) for each separate location.
229 (e) The division may impose a fine against a health spa that fails to comply with the
230 requirements of Subsection (2)(a) of up to $100 per day that the health spa remains out of
231 compliance. All penalties received shall be deposited into the Consumer Protection Education and
232 Training Fund created in Section 13-2-8 .
233 (3) The minimum principal amount of the bond, letter of credit, or certificate of credit
234 required under Subsection (2) shall be based on the number of unexpired contracts for health spa
235 services to which the health spa is a party, in accordance with the following schedule:
236 Principal Amount of Number of Contracts
237 Bond, Letter of Credit, [with an Unexpired Term]
238 or Certificate of Deposit [Exceeding 90 Days]
239 $15,000 500 or fewer
240 35,000 501 to 1,500
241 50,000 1,500 to 3,000
242 75,000 3,001 or more
243 (4) Each health spa shall obtain the bond, letter of credit, or certificate of deposit and
244 furnish a certified copy of the bond, letter of credit, or certificate of deposit to the division prior

245 to selling, offering or attempting to sell, soliciting the sale of, or becoming a party to any contract
246 to provide health spa services. A health spa is considered to be in compliance with this section
247 only if the proof provided to the division shows that the bond, letter of credit, or certificate of
248 credit is current.
249 (5) Each health spa shall maintain accurate records of the bond, letter of credit, or
250 certificate of credit and of any payments made, due, or to become due to the issuer and shall open
251 the records to inspection by the division at any time during normal business hours.
252 (6) If a health spa changes ownership, ceases operation, discontinues facilities, or relocates
253 and fails to offer an alternate location within ten miles within 30 days after its closing, the health
254 spa is subject to the requirements of this section as if it were a new health spa coming into being
255 at the time the health spa changed ownership. The former owner may not release, cancel, or
256 terminate the owner's liability under any bond, letter of credit, or certificate of deposit previously
257 filed with the division, unless:
258 (a) the new owner has filed a new bond, letter of credit, or certificate of deposit for the
259 benefit of consumers covered under the previous owner's bond, letter of credit, or certificate of
260 deposit; or
261 (b) the former owner has refunded all unearned payments to consumers.
262 (7) If a health spa ceases operation or relocates and fails to offer an alternative location
263 within ten miles, the health spa shall provide the division with 45 days prior notice.




Legislative Review Note
as of 1-29-01 11:34 AM

A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel