Credit Cards Can’t Force Arbitration of Bankruptcy Violation Suit

GE Capital Retail Bank, Citigroup Inc., and Citibank, N.A. can’t compel arbitration of cardholder lawsuits over the pursuit of debts that were discharged in bankruptcy, the Second Circuit reaffirmed.

It’s unclear whether Congress intended that mandatory arbitration clauses be unenforceable in cases brought under the bankruptcy code, the U.S. Circuit Court of Appeals for the Second Circuit said Tuesday. But precedent compels the ruling, the court said.

There’s an inherent conflict between the Federal Arbitration Act and the bankruptcy code, which is enough to override the FAA where the statutory language is ambiguous, the court said.

Tuesday’s ruling reaffirms a ...