Marvin Mandel, Governor                        1907

Code, (1966 Replacement Volume and 1970 Supplement), title "Cor-
porations," subtitle "Particular Classes of Corporations," subheading
"Associations," to follow immediately after Section 161W thereof;
to add new Section 24 to Article 58A of the Code (1968 Replacement
Volume and 1970 Supplement), title "Loans—Consumer," to follow
immediately after Section 23 thereof; and to add new Section 162A

to Article 83 of the Code, 91969 Replacement Volume), title "Sales

and Notices," subtitle "Finance Companies," to follow immediately
after Section 162 thereof; to subject, under certain circumstances,
any banking institution, savings or building and loan association,
finance company, or any person, copartnership or corporation which
makes loans for the purpose of enabling a borrower to buy goods
or services to all of the claims and defenses which are available to
the borrower against the seller.

May 28, 1971.

Honorable Thomas Hunter Lowe
Speaker of the House of Delegates
State House
Annapolis, Maryland 21404

Dear Mr. Speaker:

In accordance with Article II, Section 17, of the Maryland Con-
stitution, I have today vetoed House Bill 228.

This bill eliminates the holder-in-due-course doctrine, under cer-
tain circumstances, in actions between a consumer who has borrowed
money to purchase goods and industrial finance companies and small
loan companies. The bill, as introduced, included banks and savings
and loan associations as well as industrial finance companies and
small loan companies. However, the bill was amended so as to apply
to only industrial finance companies and small loan companies.

It is evident that certain types of financial institutions have been
singled out by the General Assembly for particular treatment under
this legislation while others, which also participate in the consumer
credit business, are exempted. The Attorney General, while not ex-
pressly disapproving the bill for constitutionality, has given me his
opinion that this treatment raises questions of due process and equal
protection of the laws under the Constitution of the United States.
The Attorney General's opinion is attached herewith and should be
considered a part of this message.

In addition to the constitutional questions raised by House Bill
228, I am concerned with the effect of this bill on consumer matters.
Under the bill, there is a likelihood of consumer confusion and
unequal treatment of both the consumers and financial institutions.
For example, a consumer may purchase a household item from a
store on a time payment basis and sign a note, and the store may
then assign the note to a lending institution. The consumer may
later realize that he has a defective item and thus a valid claim for
cancelling the contract. If the lending institution were a bank or a
savings and loan association, such an institution could still get a judg-
ment against the consumer who was the maker of the note because
of the holder-in-due-course doctrine. However, if the institution were
an industrial finance company or small loan company, the consumer
would not be liable on the note. This type of situation, as the Attorney