Barclays sued by local Government bodies for loan rates manipulationThursday, February 7, 2019
Apart from Payment Protection Insurance (PPI) and moving £1.7 billion worth of assets to Dublin, Barclays is again in the news. This time because of interest rate manipulation on loans sold to UK councils prior to the 2008 financial crisis.
Seven UK councils filed a lawsuit against Barclays at the High Court over controversial bank loans. The councils entered into a lender-option, borrower-option loan agreement, also known as “lobo”. Lobo contracts have been provided for the past forty to seventy years. Unfortunately, no regulatory body is overseeing their use. This is where Barclays took advantage of the councils and manipulated the lobo interest rates.
Lobo involves period interest re-fixings, combining two options:
- A lender’s option. The lender can set revised interest rates at prearranged dates, i.e. annually. The revised interest rates are usually higher than the previous interest reset date.
- A borrower’s option. The borrower has the option to pay the revised interest rate or to redeem the bond. Redeeming the bond might involve exit fees. This option can be exercised only if there is a lender’s option available.
The loan agreements had interest rates linked to the London Inter-Bank Offered Rate (LIBOR), a global interest-rate benchmark. If any banking institute tried to manipulate the rate, that would influence the cost of loans and mortgages to the detriment of the customer receiving the increase.
In 2012, US and UK financial regulators fined Barclays nearly £300 million for trying to manipulate the key LIBOR rate. Up until 2015, we see other banks like UBS, Royal Bank of Scotland (RBS) and even JP Morgan, fined by the financial regulators for the same practices.
The councils taking part in the Barclays lawsuit seem to be all up in the north of England:
- Leeds City Council
- Sheffield Council
- Greater Manchester Combined Authority
- Nottingham Council
- Oldham Council
- North East Lincolnshire Council, and
- Newcastle City Council.
The councils, which are claiming more than £500 million from Barclays on damages, want the High Court to cancel the existing loans without paying any exit fees or penalties. They also demand the reimbursement of sums paid in relation to the Lobo loans between 2004 and 2009.
John McDonnel, the shadow chancellor, said that councils have been left all alone to deal with expensive interest payments, putting a higher burden on local services which are already – and will keep on being – underfunded.
Barclays decline on commenting whilst the case is still open.
Claim back your money from Barclays
If Barclays is found guilty, it will indicate that it managed to commit financial fraud against the councils equal or greater to the PPI scandal. This is why we urge everyone to claim their PPI charges back from Barclays as soon as possible.
PPI was added on any mortgage, loan and credit card by the bankers between the early 1970s and 2010. Even if Barclays has rejected your initial claim, you still might have a chance to claim based on hidden commissions! Read more on how you can claim back your rejected PPI on www.plevinonline.co.uk .
If you prefer to talk to one of our PPI advisors, call 0800 954 0817 and we will be more than glad to share our expertise with you.
Remember, a claim can take up to 4 months to come to fruition. Claim before August or else you will lose your right to claim.