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Military Personnel Suing Big Banks Shouldn’t Be Forced To Arbitrate

Key Highlights

  • Department of Justice says military personnel can pursue class-action claims against Citigroup and American Express for overcharging on loans, despite agreeing to arbitrate individually.
  • The federal Servicemembers Civil Relief Act has allegedly been violated by charges imposed on military personnel, which can be challenged in court through class action lawsuits.

On 2nd March 2023, the Biden administration stated that military personnel should be able to pursue class action lawsuits against Citigroup Inc and American Express Co, accusing them of overcharging on loans and not being forced to arbitrate their claims individually.

The Department of Justice has filed “statements of interest” in a federal court in North Carolina, claiming that service members have an “unwaivable right” to pursue these claims as a group, even if they have agreed to arbitrate individually.

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Lawsuits Alleging Overcharging on Loans Affecting Military Personnel in Citigroup and American Express Cases

President Joe Biden has made consumer protection a priority in his domestic agenda. The lawsuits allege that Citibank and American Express National Bank wrongly charged military personnel more than 6% interest on certain loans. The overcharging reportedly affected several named plaintiffs on credit cards, including Army Sergeant Jeremy Bell and Army National Guard veteran Nicholas Padao, who served in Iraq.

According to the Justice Department, the federal Servicemembers Civil Relief Act, with roots dating back to the Civil War, has been allegedly violated by charges imposed on military personnel.

The Justice Department has emphasized that such charges can be challenged in court through class action lawsuits, allowing individuals to sue as a group with potentially higher recoveries and lower costs than if they arbitrated individually.

The department stated that the law is designed to ensure that servicemembers can devote their entire energy to the nation’s defense needs.

Citigroup has not yet responded to the allegations, while American Express has stated that the arbitration agreement signed by plaintiff Nicholas Padao must be enforced as written. The cases, Padao v American Express National Bank and Espin et al v Citibank NA, are ongoing in the US District Court, Eastern District of North Carolina.

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