An arcane ruling from the state's highest court last month has prompted a panic among Maryland bankers and retailers, who fear the decision could cost them millions and slow consumer lending at a crucial time of year.
The case is already conjuring up nightmarish images of consumers walking away from loans, lawyers rushing to file lawsuits by the thousands, the economy's credit crunch worsening and regulators raising doubts about the health of some Maryland lenders.
The ruling itself, stemming from a car-repossession case, Biggus vs. Ford Motor Credit Co., favored the giant automobile financier. But other issues the court chose to tackle, not directly related to the repossession, could mean that a number of installment loans -- including those for automobile or retail purchases -- do not comply with the law.
That could open the door much further than this single legal battle would suggest, threatening the soundness of millions of dollars' worth of loans and curtailing banks' willingness to lend.
"While all of the consequences of the Biggus decision cannot be predicted, the worst-case scenario is indeed a dire one," Attorney General J. Joseph Curran Jr. wrote yesterday in a letter to Del. Casper R. Taylor Jr., D-Allegany, chairman of the House Economic Matters Committee.
Bankers are pressing the General Assembly to solve the problem during its special session next week. The proposed bill, which Gov. William Donald Schaefer has agreed to sponsor, would freeze the impact of the court ruling for a year, giving the General Assembly time to deal with the issue during the regular session that starts in January.
The Biggus decision doesn't mean that consumers with outstanding auto loans or credit card debt can simply stop making their monthly payments. But the uncertainty surrounding the court ruling has driven segments of Maryland's business and political communities into action.
Bankers in the past week or so have met with legislative leaders, banking regulators and the governor. The General Assembly plans to meet in special session to take up the governor's proposed budget cuts and tax increases.
"I think right will prevail, and the appropriate time will be allotted to this issue in the regular session," said John Bowers, executive director of the Maryland Bankers Association.
Whether the bankers will succeed is unclear, as legislators are likely to give this issue secondary priority.
