Banbury man challenges Oxfordshire County Council over 60 year term loans

Ben Mobbs of Banbury is taking on the OCC NNL-160927-151332001
Ben Mobbs of Banbury is taking on the OCC NNL-160927-151332001

A Banbury man has taken on the unenviable task of challenging Oxford County Council (OCC) over its use of Lender Option Borrower Option loans or LOBOs.

Ben Mobbs has submitted a Notice of Formal Objection to OCC formally requesting the release of its statement of accounts for the fiscal year 2015-16.

The 29-year-old graphic designer is one of just 28 people to challenge their local authorities on the use of the high interest long-term loans, rather than lower interest loans available from central government.

Mr Mobbs said: “I look into a lot of local council activities, district council and county council, local politics, what are the MPs doing, what aren’t doing and trying to maintain a dialogue with them.”

Mr Mobbs became involved with political activism whilst at university marching in anti G20 rallies and his desire for accountable elected officials remains a passion.

Working in conjunction with Debt Resistance UK, an independent body, which works to challenge the narrative of debt through audits, research and accessing of information, Mr Mobbs’ has objected to OCC’c use of LOBOs on the grounds that the decision to take out such high interest loans was ‘unreasonable and irrational and could be unlawful’. Global audit firm Ernst and Young have replied to Mr Mobbs and have accepted his objection on these grounds. They will now make an approach to OCC for a response and documents pertaining to the objection, before making a decision.

There is no law against LOBO loans and their use. They are legal and are used by some 240 local authorities. The possible legal issues arise through the complex interpretations of the ‘reasonable persons test’ and ‘vicarious liability’.

Mr Mobbs said: “Earnst and Young, they will either pursue it and then present it to a high court judge and the judge can then make a decision on that. He can make a ruling that it is unlawful based on ‘would a reasonable person in a position of public trust taken those loans out’ then it could be that the loans can be wiped out as a debt obligation.”

OCC have 10 LOBO loans totalling £50 million. In a 49-page document obtained through the Freedom of Information Act it is shown that OCC took out all ten of these LOBO loans between July 2005 and October 2006 with six different European banks. Each loan was for the sum of £5 million with starting interest rates ranging from an introductory 2.65 per cent up to 4.5 per cent. All but one of these loans had a 60 year repayment plan and, where stated, they were for none specified ‘capital projects’.

Further criticism of the loans has been aimed at the high initial profits to the lender from day one. In a Channel 4 Dispatches programme, broadcast in July of this year, it was suggested that LOBOs were recommended to councils by specialist financial advisers who, unknown to the council, were in turn paid commission by the banks providing the LOBOs.

Mr Mobbs said: “I want to know when that meeting happened, who was at that meeting. Who was the section 151 officer at the time. Who was in that position of vicarious liability on behalf of the public.”

An OCC spokesman said: “Oxfordshire County Council has a low percentage of LOBO loans. The average interest rate for the LOBOs held is lower than the average rate for debt the council has with public works loans.

“Taxpayers are perfectly entitled to lodge objections to the accounts of local councils and Mr Mobbs has exercised his right. His objection will be considered by our auditors.”