Northamptonshire County Council should look at whether it should be seeking compensation from Barclays over a 'toxic' LOBO loan, according to an opposition councillor.
Mick Scrimshaw, the Labour councillor who chairs the council’s overview and scrutiny committee, asked leaders at Thursday’s cabinet meeting whether it was considering joining a lawsuit that has already been launched by other authorities across the country.
Councils taking action include Leeds, Greater Manchester Combined Authority, Newcastle, North East Lincolnshire, Nottingham, Oldham and Sheffield.
Lender Option Borrower Option (LOBO) loans are long term loans, usually between 40 to 70 years, where the lender can change the fixed interest rate over the course of the loan.
They usually start with a small interest rate to attract custom and undercut the Public Works Loans Board, but lenders have to either agree to new fixed rates on pre-determined dates, or pay back the entire loan plus a penalty fee.
The councils are arguing that initial interest rates set by Barclays were fraudulent as they was based on a manipulated libor rate, for which the bank has previously been fined £290million in 2012.
Councillor Scrimshaw said: “We had £150million worth of these toxic LOBO loans, including I believe £20million with Barclays Bank. Is it true that Barclays has approached us with a deal to change these loans to a different type of loan, and did we subsequently take up that offer?
“Legal action for compensation has been started against Barclays from several bigger and better-run councils than ourselves.
“If we do have a new arrangement with Barclays, did we sign an undertaking not to sue them for any kind of compensation? If we did, bearing in mind the approach that those other councils have taken, I would have to question whether NCC took the best approach, and I can’t help but wonder whether we would have been better advised to have joined in with that joint action instead of taking a different path.
“If we haven’t however renegotiated those loans from Barclays, why haven’t we joined in that action? I believe there is still an opportunity to do so.”
The other councils suing Barclays are urging the High Court to allow them to exit the LOBO loans without paying the financial penalties that would normally be incurred.
Council leader Matt Golby responded to Councillor Scrimshaw by saying: “On the point about the action taken by the other councils, I’m aware of it and have spoken to the chief executive [Theresa Grant] about it to see if there’s anything we can do about it, frankly.”
Back in June 2018, the Local Democracy Reporting Service reported that county council accounts showed that the authority had £130m of LOBO loans that have a call-in date within the next 12 months.
The loans were taken out to meet expenditure on road, infrastructure and schools projects.
Barclays declined to comment.