to collect millions of dollars in damages from auto lenders. The U.S. Court of Appeals for the Sixth Circuit, in a unanimous decision Oct. 25, said lenders may be violating racketeering laws when they purchase comprehensive car insurance for borrowers who have allowed their personal policies to lapse. The ruling, in a case involving Banc One Corp.'s Columbus, Ohio, subsidiary, is the first appellate decision to hold that racketeering laws apply to bank purchases of these policies, which are known as collateral protection insurance. Chief Judge Gilbert S. Merritt said the unit, Bank One Columbus, may have violated racketeering laws because it pocketed commissions it earned off these car insurance policies, rather than passing savings back to its customers. The judge also said the bank never disclosed that it received a commission. That prevented the borrower from knowing she paid more than the bank's cost for the policy, the judge said. "We may interpret the bank's failure to pass on the rebates as creating either fraudulent omissions or affirmative misrepresentations," the judge wrote. These elements are the basis for a violation of the Racketeer Influenced and Corrupt Practices Act, which provides for triple damages. Bank One did win on two counts. The court refused to revive charges that the insurance purchases violated either prohibitions against excessive interest rates or antitying rules The case now returns to the U.S. District Court in Columbus, Ohio, for trial. The 25,000 members of the class action are hoping to win more than $10 million in damages, said Ellen Doyle, who represents the consumers. "We believe this is a case where there was overreaching by the lender," said Ms. Doyle, who is a partner at Malakoff, Doyle & Finberg in Pittsburgh. She added that her clients are mostly lower-income and minority borrowers. Bank One's lawyer, David S. Cupps, a partner in the Columbus office of Vorys, Sater, Seymour & Pease, did not return calls for comment. Other banking lawyers said the ruling leaves the industry vulnerable to scores of similar class-action suits that could cost a fortune to resolve. "It has to have cataclysmic effects across the country," said Thomas Vartanian, a partner at Fried, Frank, Harris, Shriver & Jacobson in Washington. "It is the equivalent of striking oil in your backyard for plaintiffs and plaintiff lawyers." Bankers can take several easy to steps to limit future liability, Mr. Vartanian said. They should disclose all the details of the insurance policy, all the reasons why they are buying it, and who is earning commissions from the purchase. "They are going to have to bend over backwards," said Mr. Vartanian, who represents several banks with similar claims pending. The case began in 1993 when Barbara Kenty filed suit on behalf of herself and other Bank One customers who failed to maintain insurance on their cars. The plaintiffs argued that Bank One charged them for excessive insurance coverage - the loan agreement only required collision and damage policies but the bank bought insurance covering repossession costs and embezzlement. The suit also said the bank overcharged the plaintiffs. The bank argued it did nothing wrong. It said the loan agreement specifically authorized it to buy insurance for the customer.

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