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BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM S-397 Reg. W INTERPRETATION OF LAW OR REGULATION December 2, 1941 W - H 2 . The Board has been asked whether, in view of section 9(c) covering "lay-away" plans, Regulation W permits a dealer to accept a small deposit (less than the required down payment) on an article which he agrees to hold until the purchaser has accumulated and paid the required down payment, if as a part of the same transaction the , dealer delivers another similar article (such as a demonstrator) to the purchaser for him to use in the meantime # The Board has answered this question in the negative. The Board has also been asked whether Regulation W permits a dealer to deliver a demonstrator to a prospective purchaser, receiving a small deposit (less than the required down payment) and, in some cases, an old article which the seller is willing to take as a trade-in, if the prospective purchaser has and knows that he has the unconditional legal right to require the dealer to take back the demonstrator and give back the deposit and the trade-in, if any, without being under any obligation to purchase the demonstrator or similar article or under any further obligation whatsoever to the dealer. The Board has answered this question in the affirmative. The difference between these two cases is that in the first case there was a contract of sale coupled with a side agreement which, in effect, would avoid the Regulation? while in the second case there was no contract of sale and the prospective purchaser had the right to return the demonstrator and receive back the deposit and old article, if any. On the other hand if, in the second case, there had been a contract of sale, even though it was conditional and the purchaser had the right to rescind, it would have been necessary for the seller to obtain the required down payment and to calculate the maturity (in the event the contract became unconditional) from the date of the contract rather than the subsequent delivery of the article.
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