Councils sue Barclays over ‘fraudulent’ loans

17 Jul 18

Councils will take Barclays bank to court over controversial LOBO loans amid accusations of fraud, it has been revealed.

The high street bank is being sued by a group of 14 local authorities that accused the bank of fraud in issuing complex “lender-option, borrower-option” (LOBO) loans, the Mail on Sunday reported.

A claim form submitted by the local authorities and seen by the newspaper accused Barclays of “deceit and/or fraudulent misrepresentation” as its bankers were secretly rigging Libor, which was “integral” to the rate at which LOBO loans had to be paid back.

Libor is the interest rate at which banks offer to lend funds to one another in the international interbank market. In 2016, three former Barclays traders were convicted of conspiring to fraudulently manipulate the global benchmark rate.

Leeds City Council, one of the groups challenging Barclays, confirmed its involvement in legal proceedings.

A spokesperson for the council said: “We confirm that Leeds City Council has instructed Hausfeld & Co to issue a protective claim against Barclays in connection with the bank’s involvement in manipulation of the Libor benchmark rate and its impact on Leeds City Council’s entry into certain LOBO transactions with the bank.

“As this is an ongoing issue we are unable to comment further for the time being.”

Oldham and Liverpool councils also confirmed their involvement in legal proceedings.

LOBO loans can often offer interest rates below that of central government’s Public Works Loan Board, but allow lenders to change rates at set times in the future.

Refusing to pay updated interest rates would mean councils are forced to pay back the loan in full.

Lianne Craig, a partner at Hausfeld, confirmed that the firm was “acting for a number of councils and local authorities who have issued a protective claim against Barclays.”

The other councils thought to be taking legal action are: Bristol, Bradford, Greater Manchester, Kirklees, Newcastle, North East Lincolnshire, Nottingham, Sheffield, South Gloucestershire, Walsall and West Yorkshire.

Campaigner Joel Benjamin, commenting on behalf of anti-LOBO activist group Debt Resistance UK, said: “Having campaigned for councils to file fraud cases against the banks since 2014, we are thrilled councils have finally stepped in to protect local taxpayers by filing fraud claims against banks which brought our economy to the brink.

“Ten years after the crash, it’s town councils that are now facing bankruptcy to pay for the bankers’ bailouts.”

In 2016, Barclays announced that it was scrapping £8bn of LOBO loans by converting them to loans with a fixed interest rate.

The councils in question said that the loans entered into between 2004 and 2010 should be rescinded with fees returned. They also want compensation for damages.

Barclays declined to comment.

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