Newham council is suing Royal Bank of Scotland over the terms of about £150m in complex bank loans, making it the latest UK bank to face a lawsuit over lending terms that critics say piled undue pressure on local services.
The east London authority filed a high court claim against RBS earlier this week, the Guardian can report. The claim centres on terms of its lender option borrower option loans, known as Lobos, which proved popular with local councils in the early 2000s. One of the main attractions were the Lobos’ teaser interest rates that kept costs low in the short term but later proved expensive as austerity and spending cuts took hold.
Lobos have attracted criticism by campaigners and the shadow chancellor, John McDonnell, who has called for a government investigation and action to restore any historic losses to the public purse.
The east London authority took out about £578m in Lobos between 2003-10, according to data compiled by the campaign group Debt Resistance UK. About £150m of those loans were provided by RBS, making it the second largest lender of Lobo loans to Newham aside from Barclays.