RBS at risk of legal battle with London council over loans scandal
Newham Council has already filed a protective claim against Barclays at the High Court.
Royal Bank of Scotland (RBS) is at risk of being drawn into a legal battle with London’s Newham Council after the local authority filed a High Court claim over an ongoing loans scandal.
The east London local authority has taken out around £578 million in Lender Option Borrower Option loans – knows as Lobos – between 2003 and 2010, according to data compiled by campaign group Debt Resistance UK.
Around £150 million of those loans were provided by RBS, making it the second largest lender of Lobo loans to the council behind Barclays, which is now in Newham’s crosshairs.
The council has around £248.5 million in former Lobo loans from the lender, which were converted to fixed-term loans in 2016.
Newham’s legal team has taken its first steps in launching legal proceedings against Barclays after filing a “protective claim” at the High Court.
A full claim is expected to be filed near the end of 2018.
A source told the Press Association that Newham could launch a separate case against RBS in the coming weeks.
A spokeswoman from Newham Council declined to comment.
Lobo loans are controversial partly because the interest rate paid by councils changed at the bank’s discretion and often depended on Libor – the interbank lending rate – which banks like Barclays and RBS have been fined for rigging.
There are also concerns that there were unfair penalties attached to some of the deals.
Commenting on the protective claim filed against Barclays, Newham Mayor Rokhsana Fiaz said: “We have serious concerns regarding the mis-selling of Lobo loans and manipulation of the Libor rate by Barclays and potentially other banks.
“We understand that we were the first of a number of local authorities to issue a High Court claim of misrepresentation in respect of Libor manipulation.
“We continue to take all steps available to us to seek to recover money potentially denied to us at a time when local services face the prospect of being diminished because of central government’s continued austerity drive.”
A separate group of local councils have banded together to file their own protective claim against Barclays.
We expect RBS will soon be lawyering up, to waste more taxpayer money in court fighting the charges; in the continued absence of regulatory enforcement action by the supine FCA Joel Benjamin, Debt Resistance UK
Lianne Craig, a lawyer at Hausfeld, confirmed that she was acting for a number of councils and authorities over the Barclays’ involvement in “manipulation of the Libor benchmark rate and its impact on their entry into certain Lobo transactions.”
Fourteen local authorities – including Bristol, Bradford, Greater Manchester, Kirklees, Leeds, Liverpool, Newcastle, North East Lincolnshire, Nottingham, Oldham, Sheffield, South Gloucestershire, Walsall and West Yorkshire – are part of the claim, according to the Mail on Sunday.
Joel Benjamin, a campaigner and researcher for Debt Resistance UK, said the protective claim was an “opening salvo” in a larger battle against Lobo lenders.
“All councils were affected by the low-balling of Libor interest rates, 240 councils are affected by Lobo mis-selling, and there are close to 20 banks which feature in the Lobo loan market – we expect more councils and banks to be soon drawn in,” he said.
He claims Barclays tried to “get ahead of the story” by converting Lobos into fixed-term loans “which in reality was near worthless as the loans were not going to be called by banks with such low prevailing interest rates”, he said.
“RBS – true to form as the UK’s most litigious bank – has buried its head in the sand, denying toxic inverse floater Lobo loans sold to Newham, Cornwall, Lancashire and other councils are a problem when questioned at its recent AGMs.
“We expect RBS will soon be lawyering up, to waste more taxpayer money in court fighting the charges.”
RBS and Barclays both declined to comment.