Greater Manchester combined authority, Leeds, Newcastle, North East Lincolnshire, Nottingham, Oldham and Sheffield are jointly suing Barclays Bank.
The councils have complained that the ‘lender option borrower option’ loans taken out with Barclays were influenced by Libor, the interbank lending rate, which the bank was found guilty of rigging.
A Newcastle City Council spokesperson said: “We confirm that Newcastle City Council is part of a group action with other local authorities against Barclays Bank in respect of their LOBO borrowing.
“These claims relate to Barclays’ involvement in Libor manipulation. Barclays has been served with the particulars of the claim and the proceedings are now active.”
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.
According to data collected by campaign group Debt Resistance UK, these authorities have borrowed up to £573m in LOBO loans.
These 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.
Joel Benjamin, activist with Debt Resistance UK, said: “Debt Resistance UK are relieved to finally see local councils filing legal actions against Barclays related to LOBO loans, which resulted in hundreds of millions of pounds being skimmed from struggling town hall budgets.
“We are deeply concerned dozens of other councils with LOBOs, including Newham, Cornwall, Kent and Lancashire, are still facing bankruptcy, caused in no small part by the actions of unregulated advisers, banks and brokers who mis-sold LOBO loans to councils.
“We expect to see further legal actions against other LOBO lending banks.”
Barclays Bank refused to comment.
In November, shadow chancellor John McDonnell called for a government investigation into LOBO loans.
