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F E D ERAL R ESERVE BANK
O F N E W YO R K
f Circular No. 3 7 2 0 1
I June 14. 1951 I

REGULATION W
CONSUM ER C R E D IT

Free M erchandise and Rebates

T o all Persons Concerned with R egulation W
in the Second Federal R eserve D istrict:

The subject o f “ fr e e ” merchandise and rebates under R egulation W has been
re-examined, especially as it relates to paragraph (8 ) o f the summaries published
at 222.118, 15
B

u l l e t in

F

ederal

R

e g is t e r

7827, N ovem ber 17, 1950, 1950

F

ederal

R

eserve

1615, and at page 2 (Sum m ary No. 8) o f the pam phlet which was issued

by this Bank on Decem ber 21, 1950.

The B oa rd has concluded that the summary

in paragraph (8), while o f course rem aining subject to the qualifications indicated
fo r such summaries, should be revised to read as fo llo w s :
( 8 ) Free m erchandise and rebates. — A n instalment vendor o f a listed article is
not prohibited by the regulation from giving a discount or rebate on the sales price o f a
listed article or from making a bona fide “ fr e e ” g ift o f other merchandise to the buyer
o f a listed article.

However, in the case o f a cash discount or rebate, and also in the case

o f a “ free ’ ’ g ift which allows the customer to make a selection among a variety o f merchandise
or which is otherwise similar or equivalent to cash, the down payment to be obtained on
the article must be net o f the amount received b y the purchaser from the vendor.

In the

case o f other “ fre e ” gifts, the down payment must be obtained on the gross price o f the
listed article without any deduction for the “ fre e ” gift.

A dditional copies o f this circular will be furnished upon request.




A

llan

Sproul,

President.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102