/>iIn Espin v. Citibank, N.A. 126 F.4th 1010 (4th Cir. 2025), plaintiffs were retired servicemembers who had accrued large balances on their Citibank credit cards during service. Pursuant to the Servicemembers Civil Relief Act (SCRA), which requires that issuers of credit cards cap interest payable by military members, Citibank assessed plaintiffs interest of 6 percent or less while on active duty. But upon their leaving service, Citibank began charging plaintiffs standard civilian rates, a practice that plaintiffs argued amounted to a “veteran penalty” in violation of the SCRA. Plaintiffs also asserted a cause of action under the Military Lending Act (MLA), in addition to other federal and state law claims.
Citibank moved in the district court to compel arbitration, asserting that the terms and conditions of plaintiffs’ credit cards included an agreement to arbitrate disputes and a class arbitration waiver. The district court denied Citibank’s motion, holding that the language in 50 U.S.C. § 4042(a)(3) sufficiently evidences congressional intent to “proscribe waivers of the right to pursue relief as a class in federal court.” Espin, 126 F.4th at 1015. Thus, plaintiffs could proceed in federal court notwithstanding their agreements to arbitrate.
On appeal, the central issue was whether § 4042(a)(3) contains “‘a clearly expressed congressional intention’ to override the FAA’s instruction to enforce arbitration agreements.” Id. at 1016 (quoting Epic Sys. Corp. v. Lewis, 584 U.S. 497, 510 (2018)). According to the Fourth Circuit, it does not. § 4042(a)(3) states that a person “aggrieved by a violation of this chapter may in a civil action…be a representative party on behalf of members of a class or be a member of a class, in accordance with the Federal Rules of Civil Procedure, notwithstanding any previous agreement to the contrary.” According to the court, this provision is permissive, allowing for an aggrieved person to bring a federal class action despite an agreement to the contrary. But the SCRA as a whole does not even mention arbitration and this silence cannot be read as a prohibition on resolution of SCRA claims in a non-federal forum or the enforcement of agreements to arbitrate. The court remarked that congress knows how to override the FAA and has done so under other statutory frameworks—§ 4042(a)(3)’s silence as to arbitration cannot be given the same effect as an explicit mandate. See CompuCredit Corp. v. Greenwood, 565 U.S. 95, 103–04 (2012) (collecting cases). The Fourth Circuit also observed that legislative history—while not dispositive—supports its findings. In both 2019 and 2021, proposed revisions to the SCRA that would have prohibited arbitration of claims absent mutual consent were proposed and not enacted.
In contrast to the SCRA, the court noted that the MLA does manifest a congressional intent to override the FAA. In so holding, the Fourth Circuit joined the Eleventh Circuit, which last year found that “the MLA plainly overrides the FAA.” Steines v. Westgate Palace, L.L.C., 113 F.4th 1335, 1344 (11th Cir. 2024). A summary of the Steines decision can be found in the Winter 2025 edition of The Brief.
Espin clarifies that plaintiffs bringing claims under the SCRA will, at least in the Fourth Circuit, be bound by executed arbitration agreements. This clarification reaffirms the Supreme Court’s consistent refusal to “conjure conflicts between the [Federal] Arbitration Act and other federal statutes,” Epic Sys. Corp., 584 U.S. at 516–17.
