No they cannot. That is why it is a deposit and not paid in full. A deposit is a placeholder. I agree this does not sound like a good breeder. I agree with Rose n Poos that perhaps the PCA has little knowledge of this breeder. As I don't know their name, I cannot comment on any reputation they might have. They are within their right to refuse you the deposit back but you certainly have the right to back out. I am liking this breeder less and less as I hear more about them. It's true that you should have done more research on whether the allergy aspect would work out and what would happen if it didn't, but the breeder sounds like they are not trying to work with you at all.Now they are saying my deposit was my promise to purchase her? They can’t actually force me to pay the balance can they?? ($500 deposit, $3k total)
If you are certain you want to back out, I would cut your losses and consider it a lesson learned. And after some time, if you decide you do want a puppy, you know the important questions you need to be asking.