A group of homeowners in the U.S. launched a class-action suit against some of the world's largest banks, claiming the institutions' manipulation of the benchmark LIBOR rate made their mortgages more expensive than they should have been.
Lead plaintiff Annie Bell Adams and four others filed suit in a New York court, claiming Barclays, UBS, Bank of America and other lenders are liable for their mortgage rates being artificially higher because of illegal manipulation of the LIBOR rate, the Financial Times reported.
An acronym for the London Interbank Offered Rate, LIBOR is a benchmark for trillions of dollars worth of loans and investments globally. Ostensibly a moving gauge of how much banks pay to borrow different amounts of money from each other, an investigation earlier this year revealed widespread manipulation of the rate.
Traders manipulated rates
Barclays has agreed to pay more than $500 miillion US in fines after internal emails revealed traders were claiming borrowing rates that were higher or lower than what they were actually having to pay in reality.
Although it has limited impact in Canada, variable-rate mortgages tied to LIBOR are common in the United States, and the lawsuit alleges the banks' actions caused borrowers to pay more than they should have done.
There are almost one million U.S. mortgages tied to LIBOR, with a total loan value of more than $275 billion outstanding, official data shows.
Pension plans and municipalities have launched similar lawsuits attempting to recoup LIBOR-related costs, but it's believed this lawsuit is the first time a person on the level of the individual homeowner has taken legal action in the unfolding story.
The total number of affected borrowers could number in the hundreds of thousands, each being owed thousands, John Sharbrough, the Alabama-based lawyer heading up the lawsuit was quoted as saying.
Beyond noting that they dispute the claims, none of the banks named in the lawsuit had any comment.
More to come