North West councils suing banking giant over ‘toxic’ loans

Manchester and Oldham councils are reportedly suing Barclays Bank over loans they claim they were fraudulently sold.

According to a BBC report, they are among seven local authorities taking action.

The councis claim Barclays maniupulated the interest rates on the products, which are known as lobo loans – Lender-Option Borrower-Option.

Reports say the seven councils took 49 lobo loans out with Barclays between 2004 and 2010, worth a total of £550m.

Lobos usually offer a low “teaser” interest rate for the first few years to attract custom.

But the lender can increase the interest rates at fixed points in the loan term.

Borrowers must then either repay the loan, plus a penalty fee, or move on to the higher rate of interest.

The local authorities claim that, because of Barclays’ involvement in the London interbank offered rate scandal – Libor scandal – initial interest rates were fraudulently set.

In 2012, financial regulators in the UK and US fined Barclays £290m for trying to manipulate the key Libor rate, which influenced the cost of loans and mortgages.

The local authorities want the High Court to allow them to exit the agreements without any penalty.

Information has been gathered by the campaign group UK Debt Resistance through Freedom of Information requests.

Joel Benjamin, from the campaign group, has described the loans as “toxic”.

A spokesperson for Leeds City Council, which is leading the action, said: “These claims relate to Barclays’ involvement in Libor manipulation. Barclays has been served with the Particulars of Claim and the proceedings are now active.”

Barclays declined to comment.