## Facts

- Auto-loan borrowers obtained loans from Bank One to purchase vehicles.
- The loan agreements required borrowers to maintain collision and comprehensive insurance, and authorized Bank One to obtain insurance and add the premium to the loan balance if borrowers failed to do so.
- The borrowers did not obtain the required insurance, so Bank One procured lender-placed policies through Transamerica and charged the premiums to the borrowers’ loan balances.
- Borrowers alleged Bank One purchased coverage beyond what the loan contracts permitted, including coverages primarily protecting Bank One’s interests and arrangements in which Bank One received rebates or other financial benefits tied to premiums.
- Instead of pleading a contract claim, borrowers sued under RICO (against Bank One and Transamerica), the National Bank Act’s usury provisions (against Bank One), and the Bank Holding Company Act’s anti-tying provisions (against Bank One).
- The district court granted summary judgment to defendants on all claims.

## Issues

1. Whether borrowers presented sufficient evidence of RICO elements—an enterprise, a pattern of racketeering activity, and predicate acts of mail or wire fraud—based on alleged deceptive communications and omissions concerning lender-placed insurance.
2. Whether amounts charged for lender-placed insurance (and interest assessed on amounts added to the loan balance) constituted “interest” and were usurious under the National Bank Act, 12 U.S.C. § 85.
3. Whether requiring collateral insurance and procuring lender-placed insurance when borrowers failed to obtain coverage constituted an unlawful tying arrangement under 12 U.S.C. § 1972.

## Decision

- The Sixth Circuit affirmed in part and reversed in part.
- The court reversed summary judgment on portions of the RICO claims, holding that some allegations and evidence could permit a finding of mail/wire fraud based on material misrepresentations or omissions relating to additional coverage and undisclosed bank benefits.
- The court affirmed summary judgment against plaintiffs on the National Bank Act usury claim.
- The court affirmed summary judgment against plaintiffs on the Bank Holding Company Act anti-tying claim.

## Legal Principles

- Mail or wire fraud predicates for RICO may rest on material omissions or misleading half-truths when communications, viewed in context, could deceive recipients about the nature or purpose of charges.
- Loan-related charges are not “interest” for National Bank Act usury purposes merely because they are assessed in connection with a loan; insurance premiums and related costs are not treated as usurious interest absent proof they function as a device to extract unlawful interest.
- A bank’s requirement that borrowers maintain insurance on collateral, and its procurement of coverage when borrowers fail to do so, is generally a permissible credit-protection practice and does not, without more, establish an unlawful tie under 12 U.S.C. § 1972.

## Conclusion

The Sixth Circuit allowed parts of the borrowers’ RICO case to proceed based on evidence that lender-placed insurance communications could have been misleading by failing to disclose extra coverage and self-interested financial arrangements, but it upheld dismissal of the National Bank Act and anti-tying claims because the insurance charges were not shown to be usurious interest and the insurance requirement did not constitute a prohibited tying condition.


Kenty v. Bank One, Columbus, N.A., 67 F.3d 1257 (6th Cir. 1995)