Residents from 24 different local authorities have mounted legal objections to the use of the controversial high-interest Lender Option, Borrower Option (LOBO) loans by councils.
The loans came to prominence after a Channel 4 Dispatches programme revealed that around 240 local authorities had taken up to £15bn in LOBO loans from private banks, which charge interest rates of more than 7% in some cases.
An inquiry into the loans also revealed some councils had paid brokerage fees of £25,000, compared to £75 for the equivalent Public Works Loan Board (PWLB) loans.
The legal objections against LOBO loans have been lodged by residents under the 2014 Local Audit and Accountability Act over the past two months, claiming the loans are ‘irrational’ expenditure and therefore unlawful.
Researcher at campaign group Debt Resistance UK (DRUK), Joel Benjamin, said: ‘UK local government finance is completely unregulated so it’s great to see local residents around the country taking action, demanding accountability over how billions of pounds of public money is spent.’
DRUK said a ‘significant’ proportion of LOBO loans should be cancelled so councils can refinance at lower rates of interest.