WASHINGTON -- A federal appellate court has struck down class certification in a case brought by a Wisconsin couple who claimed that they didn't understand the terms of the option ARM loan they obtained from Chevy Chase Bank.

A trial judge ruled that the Maryland bank violated the federal Truth-In-Lending Act, ruled that the couple could rescind the loan and granted class action certification.

That decision opened the door to a class action suit of at least 7,000 homeowners who had obtained option ARM loans from the bank and also caused industry fears that similar lawsuits against other lenders would soon follow.

A judge for the 7th Circuit Court of Appeals reversed the class action status, deciding that truth-in-lending violations have to be decided on an individual basis.

CUNA Senior Assistant General Counsel Jeff Bloch said class actions are easier for borrowers to bring and can lead to higher judgments. "Denying class action claims in these situations may, therefore, limit future recession claims Although the issue here is the Option-Arm loan, this will apply to all claims to rescind credit under the Truth in Lending Act."