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Circular No. 3 7 1 5 1
June 1. 1951


Large Quantity Sales o f Listed Articles
T o all Persons Concerned with R egulation W
in the Second Federal R eserve D istrict:

W e quote from a letter received from the B oa rd o f G overnors o f the F ederal Reserve
System in response to questions relating to instalment sales or leases o f large quantities o f
listed articles:
F rom time to time questions have been received under Regulation W concerning the provisions o f
sections 7 ( a ) , 8 ( j ) (5 ) and 8 ( j ) ( 6 ) which exempt from the regulation instalment credit โ€œ in a principal
am ountโ€ exceeding $5,000 in the case o f automobiles, and exceeding $2,500 in other cases.
Whether credits considered individually or collectively. โ€” In certain circumstances, credits may
be added and treated collectively as a single credit for the purposes o f the foregoing dollar figures. T o be
considered collectively as a single credit, the indebtedness must not only be incurred between the same
Registrant and one customer, but it also must be incurred pursuant to a basic contract between them
which governs the indebtedness and which must be relied upon to enforce the indebtedness. E ven if
there is some kind o f basic contract, various items under it cannot be added together to reach the
$2,500 (or $5,000) figure if they are represented by individual notes or other evidences o f indebtedness
that would support an action fo r the debt without resorting to the basic contract.
The amount stated in the basic contract is not controlling except to the extent that articles have
actually been delivered or funds actually been disbursed pursuant to the contract. This may be
illustrated by an example in which a Registrant and a customer enter into a contract for the delivery
and instalment sale to the customer of, say, 50 refrigerators. Suppose further that each delivery of
refrigerators is represented only b y a mere receipt that refers back to the original contract and would
not support a separate action. In such a case, deliveries under the original, basic contract would be
subject to the regulation until the outstanding indebtedness exceeded $2,500. Once that figure was
exceeded the entire credit would be exempt. A dditional deliveries under the contract while the
indebtedness exceeded $2,500 would also be exempt.
The foregoing principles would apply also in the case o f instalment leases or instalment loans.
Continuance of over-$2,500 ($ 5 ,0 0 0 ) exemption. โ€” The over-$2,500 (or $5,000) exemption is
not lost m erely because the principal amount o f instalment indebtedness falls below such figure as the
obligation is paid down. However, when such indebtedness has fallen below the exemption figure,
additions thereto do not get the benefit o f the exemption unless they are sufficient to bring the total
o f the indebtedness above the exemption figure. W hen the outstanding credit under a leasing or similar
contract fo r financing quantity merchandising has exceeded the exemption amount, substitutions or
exchanges o f articles that are contemplated by the contract may be made without regard to cash
repayments that may in the meantime have reduced the amount o f the credit.

The views expressed above should be regarded as superseding the view s expressed in any
earlier interpretations under the regulation dealing with the same subject, including those
expressed in our Circular No. 3634, dated D ecem ber 27, 1950, and restated at pages 5 and 6
o f our Circular No. 3687, dated A p ril 2, 1951.
A dditional copies o f this circular will be furnished upon request.



S proul,

P resident.

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