A federal judge in Washington State has granted class-action status to a lawsuit filed against First USA Inc., a credit card unit of Bank One Corp. of Chicago, that alleges fraud and violations of federal law in the way it fixed interest rates on individual accounts.

The case potentially involves 10 million of First USA's credit card customers and could bring $1 billion in damages, a lawyer in the case said. Judge Robert S. Lasnik of the U.S. District Court for the Western District of Washington, made his ruling this week.

The lawsuit, originally filed in 1997 by two individuals, alleges that First USA, of Wilmington, Del., defrauded customers by offering a fixed annual percentage rate on credit cards and raising that rate later.

The class applies to "all persons who received an offer [whether by mail, television, or other medium] from First USA Bank promising a fixed APR and who were charged an APR in excess of the fixed rate," according to a statement.

First USA was acquired in 1997 by the former Bank One Corp. of Columbus, Ohio, which has since merged with First Chicago NBD Corp. The unit has been a headache for the new Bank One since early last year, when disgruntled customers began leaving in droves after the card unit instituted a new late fee policy.

The card issuer quickly dropped the policy, but not before the damage was done. Lower revenues from the unit forced Bank One to issue successive profit warnings last year, ultimately leading to the resignation of former chairman John B. McCoy.

A spokesman for Bank One said the company does not comment on pending litigation.

The lawsuit differs from another suit against the card issuer that was recently sent to arbitration by a federal judge. That lawsuit, heard in federal court in Dallas, alleged that First USA improperly assessed late fees ranging from $25 to $35 to customers and took too long to post credit card payments. After late fees mounted, First USA raised interest rates on those credit cards, the suit contended.

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